Rosy Risk Dynamics To Kick Off June
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Rosy Risk Dynamics To Kick Off June

Authored by Ivan Delgado

Ivan Delgado is a decade-long Forex Trader. Feel free to follow Ivan on Youtube. Join thousands of traders who follow Ivan's insights to increase their profitability rate by learning the ins and outs of how to read and trade financial markets. Ivan has you covered with in-depth technical market analysis to help you turn the corner.

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Scan Of The Markets

The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.

Despite equities kicked off the first few hours in June with a soft note in what I suspect could be a more cautious approach on the back of the riots spreading across dozens of cities in the US, in the grand scheme of things, that’s just a blip in a green ocean.

To what extend the market may be connecting the dots by fearing that such unrest in the US may be sprouting up new COVID-19 chain events as social distancing is not respected is anyone’s guess.

In all honesty, why venture into such complicated assumptions of little actionable insights if ultimately, it will nonetheless be reflected via technicals and intermarkets, which the compass to orient ourselves.

Judging by the behavior in equities and risk-sensitive FX such as the USD or JPY during the month of May, it’s hard to argue that the market is much more focused on a glass half-full approach.

If anyone needed more proof of this forward-looking positive psyche by Mr. Market, the dismissal of truly appalling US data last Friday, with Q2 GDP Now at -51.2% annualised from -40.4% should do the trick.

This has led to pricing into risk assets the hopes of a steady pick up in economic activity as more countries try to go back to some type of normalcy with dozens of prototype vaccines in human trial phase.

Another driver for financial markets last Friday, which ended up as a dull event since it never lived up to the build up of fears it caused came via the retaliatory measures by Trump on China in response to the recent developments in the Hong Kong security law.

The measures against China were either already known in advance due to leaks or fell on the soft side. As a result, risk rebounded before the end of the month.

So, with the most pressing fundamental news driving market sentiment out of the way, let’s now concentrate on the technical outlook:

  • The S&P 500, as my favorite bellwether instrument to assess market sentiment, still has active upward targets to be met based on the recent bullish targets where structural changes occurred. The 3,160.00 now comes into play following May 25th close candle. Granted, the 4h chart has transitioned into a range now.
  • The EUR/USD met its 100% measured move target in what proved to be a very fast move from the moment the 1.10 round number was broken on May 27th. The extension into higher levels, as momentum and structure stands is certainty in the cards, but if you are looking for technical value, we are at expensive levels.
  • The GBP/USD suggests more upside room until the first conservative 100% projection target at 1.2430 is met, followed by an aggressive one circa 1.2515, activated upon a break and hold through 1.2360. The daily ticks all the boxes (momentum, structure, levels) to keep supporting the buy-side bias, while the 4h chart has seen what I expect to be a transient range established.
  • The AUD/USD remains exceptionally well positioned to keep ripping the benefits of the overall ‘risk on’ dynamics. Last Friday’s price action candle, alongside the momentum and structure of the daily chart, all unquestionably support to buy this market. In the 4h chart, we’ve entered a spell of contraction with clear dangers for an ultimate breakout into higher territory as the lay of the land stands.
  • Be reminded that as of late, the USD prop index imploded by breaking into a fresh bearish structure, and as a by-product of the negative aggregated flows, the commodity-linked currencies, together with the EUR and GBP, have capitalized on it. These breakouts in AUDUSD, USDCAD, EURUSD, etc are a crushing blow for the near term expectations of USD bulls.

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Insights Into Market Flows

This analysis is conducted on a multi timeframe dimension. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter a position, hence the video is mainly intended as a way to educate traders in upping their analytical skills.

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Recent Economic Indicators & Events Ahead

Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!

Important Footnotes

MARKET STRUCTURES

Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

SMART MONEY TRACKER 

In order to assess the market momentum of a particular asset, I’ve promoted for years the idea of using what I call the smart money tracker. The settings and the indicator can be obtained via our Discord room, where traders from all walks of life interact frequently. In this video I lay out the elements I look into to call trend directions.

SUPPORT & RESISTANCE

Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.

FUNDAMENTALS

It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

PROJECTION TARGETS

The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection